The deal, Legg CEO Joseph A. Sullivan said on a conference call with analysts, "is entirely in keeping with what I have said many times, namely that we intend to have fewer and larger affiliates to brand and to market."

With $680 billion under management at the end of January, Legg Mason is one of the largest fund firms, but has struggled to end withdrawals of cash by investors since the financial crisis.

News of the deal spurred Legg Mason's shares to trade higher than they have since 2008 amid a broader rally in financial stocks. Shares of Legg Mason rose $1.34 each in Tuesday trading to close at $46.65.

QS Investors mainly serves institutional clients, but Sullivan said he hopes to make some of its strategies available to retail investors as well.

"Optimizing and expanding our portfolio of investment products has been a top priority for our senior management team," Sullivan said in the company's announcement. "The combination of QS Investors' highly regarded investment capabilities and thought leadership with our existing investment teams creates a powerful offering in an area of the market that is expected to experience significant growth in the coming decade."

The acquisition, which is expected to add modestly to Legg's earnings in the first year, is set to close in the first quarter of fiscal year 2015. The Baltimore firm expects to incur $35 million in restructuring and transition costs.

The agreement will result in an unspecified number of layoffs, Legg Mason spokeswoman Mary Athridge said, as the two other Legg Mason units are combined with QS Investors.

The expanded QS Investors will be headed by QS Investors CEO Janet Campagna, who will retain the CEO title, and Rosemary Macedo as chief investment officer. Investment professionals from both Batterymarch and Global Asset Allocation will join the team, Legg Mason said.

Campagna said in the announcement that QS and Legg Mason share a "client first" culture. QS Investors provides asset management and advisory services to institutional clients.

QS Investors was once a unit of Deutsche Bank AG and was spun out in 2010 as a privately held firm. Campagna said on the conference call the deal would help in areas like sales.

A California-based unit of Legg Mason Inc. agreed to pay more than $21 million to settle government charges that it defrauded clients by not properly informing them of losses caused by improper investments and by engineering trades between clients that shorted the sellers.

Readers submit photos and information on employees who have recently been promoted, hired or honored at area businesses. Select photos will be published in the Maryland Business section of Tuesday editions of The Baltimore Sun. Caption size is limited and only photos are accepted in this...

Two of Baltimore's most prominent developers want to build an arena on piers in the Inner Harbor, a new idea that has revived perennial debate about how to replace the aging arena on the city's west side.

Toys "R" Us stores will be taking back used baby products — cribs, high chairs, car seats, strollers and more — starting this weekend in exchange for discounts on new items, an annual event that has helped remove more than a million potentially unsafe items from the marketplace.